Savings vs Investments PPT

Savings vs.
Savings is the portion of current income
not spent on consumption.
Investing is the purchase of assets with the
goal of increasing future income.
Risk, Return, and Liquidity
 Risk
The chance that the value of an
investment will decrease.
 Return
The profit or yield from an investment.
 Liquidity
The ability of an investment to be
converted into cash quickly without
loss of value.
Risk, Return, and Liquidity
 Savings
Low risk
Low return
High liquidity
 Investments
High risk
High return
Low liquidity
Inflation, Savings and
Today, a large soft drink at your
favorite fast-food place costs
$1.00. You buy the soft drink
but also decide to save some
money for the future as well.
So you put a dollar in your
savings account, where it earns
Inflation, Savings and
One year later, the dollar in
your saving account is worth
$1.05. You take the money out
and visit your favorite
convenience store, hoping to
buy another delicious beverage.
Unfortunately, drinks now cost
Inflation, Savings and
The point? Inflation can work
against your money. You need
to learn to invest wisely, follow
the rate of inflation, and make
sure your investment rates are
higher than those of inflation.
Time Value of Money
 The
time value of money refers to the
fact that a dollar in hand today is
worth more than a dollar promised at
some future time.
Future Value
 Refers
to the amount of money to which
an investment will grow over a finite period
of time at a given interest rate.
 Put another way, future value is the cash
value of an investment at a particular time
in the future.
“You can always
more money,
but you can’t make
more time.”
Respond to this statement
on your guided notes and
then discuss it with a
partner. How does it relate
to future value?
Time Value of Money
Picture from NEFE
Risk and Return
 What
is the relationship between
risk and return?
Which financial product is
appropriate for the
following situations?
 Saving
for a senior trip
 Saving for a down payment on a
 Saving for retirement
NEFE Teacher Guide
Sample Student Work
Sample Student Work